Keir Starmer risks losing the next election to Reform if he backtracks on plans to give councils in Red Wall areas more money, a Labour local government chief has warned.
The plan to redistribute Whitehall funding away from wealthier local authorities in London and the south east and towards more deprived areas, particularly in the Midlands and northern England was one of Angela Rayner’s top priorities in office.
But the resignation of the Deputy Prime Minister has triggered concern among the group of Red Wall councils that her replacement, Steve Reed, could water down the reforms and lead to dozens of town halls facing bankruptcy.
Sir Stephen Houghton, the Labour leader of Barnsley council and chairman of the Sigoma group of 50 local authorities in mainly Midlands and northern towns, said there could be “dire political consequences” for Labour at the next election because Reform were “breathing down our necks” in those seats.
Asked whether Labour could lose the next election if these reforms weren’t delivered, Houghton said: “Yes, because if Labour loses local government across the country, generally, but particularly in our areas, the outcome of their elections will decide the next general election. It’s as simple as that.”
Houghton has asked for an urgent meeting with Reed, the new Housing and Local Government Secretary, and his deputy Alison McGovern, to urge them to implement Rayner’s plans – which are due to be introduced next April – in full.
Nigel Farage’s party made significant gains at last May’s council elections in England, and have been surging in national opinion polls.
Houghton said that if the new funding was not delivered to his group’s council areas then their voters would lose faith in the Labour government.
He also warned that a watering down of the reforms risked more councils declaring themselves effectively bankrupt through issuing section 114 notices.
More than a dozen councils have already been forced to take this step since 2018.
Houghton told The i Paper that Rayner, and her deputy Jim McMahon, who also lost his job in the reshuffle, had done a “fantastic job” of overseeing the new funding reforms.
Serious political consequences
He added: “We’ve waited 15 years for fundamental reform to local government finance, and the government obviously instigated that last year.
“Obviously, there’s a new ministerial team in there, and they’re good people as well, but I think our members are worried about what does that change in personnel mean for the finance settlement?
“Because it’s absolutely crucial that we proceed with that… It puts the money where it needs to be to those that have suffered for the last 15 years, and we want to make sure we want to support the government in driving that through.
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“If that did not happen, then there could be significant political consequences for places like ours, because Reform are breathing down our necks.
“And if we can’t show, in the north and Midlands in particular, but in those other urban places like Plymouth and Southampton and Portsmouth and so on, that improvement that’s currently being promised, then clearly there could be dire political consequences for the [Labour] party.
“So making sure that that good work, that new system is put into place is absolutely essential.”
He said his members were “getting really, really nervous, and we’re looking for assurances from ministers that all that hard work over the last 12 months, that 15 year wait, isn’t going to be lost”.
Houghton said that London councils, who stand to lose money under the new settlement, had been lobbying hard against the reforms.
He added: “I can only guarantee you, you will be looking at section 114 notices en masse if they don’t push it through.
“And you will be looking at the dire political consequences across the Midlands and the North that goes with that.
“So it’s essential that Steve and Alison and the new team recognise the importance of this for the future of local government across some of those deprived areas of the UK.”
The redistribution of central government funding would show voters in Red Wall areas that “Labour cares”, the council leader said.
The government said it is reviewing proposals for the council funding overhaul – known as the Fair Funding Review – and will publish a response in the autumn.
A Ministry for Housing, Communities and Local Government spokesperson said: “We’re committed to fixing the outdated funding system we inherited, which has failed councils.
“We will give people the high-quality public services they deserve as part of our Plan for Change.”
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